Build-To-Suit And Flex Buildings

There has been a move on the part of industry to relocate from the cities to the suburbs during the past few decades. The prime reasons were cheaper land costs and a greater amount of labor sources.

The result of this has been the establishment of industrial and office parks in those suburbs. Many of these have been planned and developed by private investors; others have been planned or sponsored by public agencies. Preparation for construction of an office or industrial park is expensive. It includes plotting, grading, and installing streets, utilities, rail connections and other facilities. With the increasing difficulties in securing clearances and permits, speculative development in building these facilities is down.

With the economy improving, there   is an increase of interest in some build-to-suit projects.

Benefits Of The Build-to-Suit Facility

Some tenants require a certain type of building, so there is always some build-to-suit construction continuing. If the developer has a new tenant requiring certain specifications in a building, his exact needs can be planned in advance and worked into the original construction plans. In this case the cash flow starts immediately as soon as the project is completed. There are no high risks of speculative development for the developer in such a project.

In good economy or bad, the tenant in any build-to-suit facility does not have to compromise on size or types of buildings.

The Speculative Flex Building

With the improved economy developers are again building industrial parks on speculation. To appeal to the most tenants, builders usually choose low-rise flex buildings.

The flex building is a speculative, low rise, single or multi-tenant building that is designed to accommodate different amounts of office and work areas, depending on the lessee’s needs. The developer finishes the outside of the building and the grounds, but leaves the interior only partially completed until the tenant takes the space. At that time, the interior is customized to provide space for light manufacturing, warehouse and distribution, research and development, sales and accounting or inventory control office space.

The flex building is usually one-story. It usually contains standard attributes that help control construction costs, such as:

  • Ceilings of 16 to 22 feet. This should suit nearly any manufacturing, distribution and office operation.
  • A state-of-the-art HVAC system that will provide zoned temperature control capability, advanced security measures, and “clean” atmospheres throughout.
  • Loading docks that are flexible enough to adapt to any tenant’s specific needs. Adequate parking space. Well planned driveways with access for all sizes of trucks.

Benefits For The Developer

Because the building is attractive to a variety of tenants, the developer finds:

  • Lower financing costs because lenders look more favorably on flex buildings than on standard speculative industrial buildings.
  • Faster lease-up because a much larger pool of potential tenants exists from which to draw.
  • Lower construction costs because the staged construction eliminates costly and time-consuming rip-outs of already installed interior spaces that do not meet a tenant’s needs. Further a tenant’s expansion needs are more easily met (and at lower cost) due to the building’s flexible design features.

In many cases, much of the space in flex buildings may be used for office use. With that use, the building becomes a lower cost all-office alternative to the typical low-rise office building.

Posted in Industrial Properties Tagged with: ,